A rate cut does not equal a rise, but indicates that there are liquidity issues in the financial system. The driving force behind the rise in gold is negative real interest rates. Real interest rate = Nominal interest rate - Inflation rate When inflation is high but nominal interest rates do not rise, real interest rates are negative.
Actual negative interest rate ↓ → Currency devaluation, liquidity excess → Capital flows into risk assets (stocks / real estate / cryptocurrencies) → Market bubble expands → Safe-haven assets (gold / U.S. Treasuries) hit new highs in price
When the Federal Reserve cuts interest rates: → Nominal inflation is suppressed → Investors reduce risk asset allocation → To supplement margin or liquidity → Sell off safe-haven assets → Short-term correction of safe-haven assets
This is not to make you invest in gold, but to recognize the reality that gold has never been used to fight inflation. It is only when real interest rates turn negative and continue to persist that the safe-haven attribute of gold is truly activated.
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A rate cut does not equal a rise, but indicates that there are liquidity issues in the financial system.
The driving force behind the rise in gold is negative real interest rates.
Real interest rate = Nominal interest rate - Inflation rate
When inflation is high but nominal interest rates do not rise, real interest rates are negative.
Actual negative interest rate ↓
→ Currency devaluation, liquidity excess
→ Capital flows into risk assets (stocks / real estate / cryptocurrencies)
→ Market bubble expands
→ Safe-haven assets (gold / U.S. Treasuries) hit new highs in price
When the Federal Reserve cuts interest rates:
→ Nominal inflation is suppressed
→ Investors reduce risk asset allocation
→ To supplement margin or liquidity
→ Sell off safe-haven assets
→ Short-term correction of safe-haven assets
This is not to make you invest in gold, but to recognize the reality that gold has never been used to fight inflation. It is only when real interest rates turn negative and continue to persist that the safe-haven attribute of gold is truly activated.